Addressing the cost of electrification

This report outlines the challenges that energy intensive industries (EIIs) face in decarbonising their heat supply, (currently dominated by natural gas) by switching to grid-supplied electricity. The paper has been sponsored by the Confederation for Paper Industries (CPI) and therefore has a particular focus. However, many of the challenges highlighted here may be applied to – and may reflect the experiences of – other energy-intensive industrial sectors.

Our analysis indicates that switching heat generation from natural gas to electricity is not currently a commercially viable option for industry, because the cost of grid-supplied electricity is much higher than the comparative cost of natural gas. For internationally traded energy intensive goods, UK-based sites cannot stay competitive if they face higher energy costs than those faced by competitors outside the UK – where there may not face the same drive to immediately begin the phase-out of natural gas for heat production.

This paper explores these issues and outlines a number of policy options to address the price discrepancy between gas and electricity so that switching to electricity from gas could become a commercially viable proposition.

Tom Andrews

Tom Andrews

Dan Starman

Dan Starman

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